What is a health insurance premium? 2024 guide
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Health insurance can be a bit tricky to understand, but one key element is the "health insurance premium." Think of it as the amount you pay each month to keep your insurance active.
Now, when it comes to figuring out how much that monthly payment is, several factors come into play. These factors include things like your age, health status, and the type of coverage you want. That's what we'll discuss in this detailed guide so you have a clear idea about how your premiums are calculated.
To make things easier, you can use our free comparison tool to get personalized health insurance premium quotes from different companies and find the best deal for you. Shop around to make sure you get the most value for your money right here in no time.
Health Insurance Premium: 7 Key Takeaways
- It is the regular amount paid to an insurance company, typically monthly.
- Differentiating from out-of-pocket costs, the premium is an upfront payment.
- High-costing plans offer more comprehensive benefits.
- Premiums are calculated based on factors like age, health condition, location, etc.
- Health insurance premiums are generally not tax-deductible in Canada.
- Exceptions: disability insurance premiums and deductions for self-employed.
- Deductibles, copayments, and coinsurance can be additional costs.
What is a health insurance premium in Canada?
The premium is the amount you pay regularly (typically monthly) to the insurance company to maintain your health coverage. It's essentially the price you pay for access to the medical benefits outlined in your policy.
Here's a breakdown of what a health insurance premium means:
- It's an upfront payment: Unlike out-of-pocket healthcare costs incurred when you receive medical services, the premium is paid in advance to ensure your coverage remains active.
- It's the cost of pre-purchasing health coverage: By paying your premium, you're essentially pre-paying for potential future medical expenses. This helps spread out the financial burden of healthcare costs and protects you from unexpected medical bills.
- It determines your level of coverage: Different health insurance plans have different premiums based on the level of coverage they offer. Higher-level plans with more comprehensive benefits typically come with higher premiums.
Before choosing any health insurance plan, make sure to compare different plans from multiple providers. You can use our comparator for that — just enter some basic information on what you're looking for and get personalized health insurance quotes in seconds.
Compare The Best Health Insurance Plans and Rates on the market!
How can you calculate health insurance premiums?
There are many health insurance premium calculators in the market that can help you determine the final cost. It’s pretty simple though: just multiply your monthly premium by 12 to get your yearly cost.
Using health insurance premium estimators like our HelloSafe comparator above can save you some time since some can fetch quotes directly from the insurance providers. It means that you won’t need to request quotes from each company yourself.
Health insurance premiums are often calculated based on various factors. These factors can include:
- Your age: As you age, your risk of medical conditions increases, leading to higher premiums.
- Your health: Existing health conditions can also contribute to higher premiums.
- Your location: Premiums may vary depending on your geographic location due to factors like local healthcare costs.
- Your tobacco use: Smokers and tobacco users typically pay higher premiums.
- Your chosen plan: Different plans offered by the same insurer may have different premiums depending on the benefits they cover.
- Your deductible and copays: Opting for a higher deductible or copays can result in a lower monthly premium.
What is a monthly premium for health insurance?
A monthly premium for health insurance is the amount you pay each month to maintain your coverage. It's a regular fee that keeps your insurance active. Another important factor influencing this monthly amount is the vendor or provider you choose.
There can be some-to-major price differences since all providers offer varying levels of coverage. Here are some of the leading companies in Canada for health insurance:
- Manulife Financial: A large insurance and financial services company offering various health insurance plans, including individual, group, and dental plans.
- Sun Life Financial: Another major insurance and financial services company with a wide range of health insurance products, including critical illness, disability, and travel insurance.
- Canada Life (formerly Great-West Life): Offers a variety of health insurance plans for individuals, families, and businesses.
- Blue Cross: A non-profit health insurance provider offering individual and group plans with a focus on affordability and accessibility.
- Group Medical Services (GMS): A non-profit health insurance provider specializing in group plans for small to medium-sized businesses.
Other notable companies include:
- Desjardins Group: A financial services cooperative offering various health insurance products, including individual, group, and dental plans.
- Chamber of Commerce Group Insurance: Provides group health insurance to members of chambers of commerce across Canada.
- Empire Life Insurance Company: Offers individual and group health insurance plans, including critical illness and disability insurance.
- Aetna International: A global health insurance provider offering individual and group plans for international residents in Canada.
- Cigna Global: Another international health insurance provider with plans for individuals and families living in Canada.
Here are monthly premium estimates for some of these companies for your reference:
| Company | Age | Location | Monthly Cost | Notes |
|---|---|---|---|---|
| Sun Life | 40 | Ontario | $124.94 | Single, non-smoker |
| Canada Life | 40 | Ontario | $40 - $200+ | Single, non-smoker, basic to higher coverage |
| Desjardins | 25 | Ontario | $100 - $150 | Young non-smokers |
| GMS | 24 | Ontario | $83.25 | Basic Plan with drug & dental coverage |
| Manulife | 30 | Toronto | $96.90 | CoverMe ComboPlus Basic Plan without dental |
To get a better idea of the cost, you should request personalized health insurance quotes from the vendor you like. You can use our comparator to compare plans and get free quotes from Canada's best providers right here — in minutes.
Compare The Best Health Insurance Plans and Rates on the market!
What is the average annual health insurance premium?
It’s difficult to pinpoint a single "average" annual premium for health insurance in Canada. For instance, if you take ten providers and calculate an average, it will not be the same as calculating it for 100 providers.
However, here are some estimates based on different sources:
Canadian Institute for Health Information (CIHI)
According to CIHI's 2021 National Health Expenditure Trends report, the average annual health expenditure per capita in Canada was $7,690. This includes both public and private health spending.
Please note that his figure is not a direct equivalent to the average health insurance premium, as it also includes other healthcare costs like government expenditures.
Fraser Institute
The Fraser Institute's 2021 report "The Price of Public Health Care Insurance" estimated the average annual premium for public health insurance in Canada to be $726 for individuals with the lowest incomes.
This figure only represents a portion of the total healthcare costs, as it doesn't include private insurance premiums or out-of-pocket expenses.
Here are some examples of the cost of health insurance for individuals in Canada:
- A 25-year-old healthy non-smoker in Ontario could expect to pay around $600 per year for a basic health insurance plan.
- A 50-year-old with a pre-existing medical condition in British Columbia could expect to pay around $2,000 per year for a comprehensive health insurance plan.
- A family of four in Quebec could expect to pay around $3,000 per year for a health insurance plan that covers the entire family.
Is health insurance premium tax deductible?
No, health insurance premiums are generally not tax-deductible in Canada. However, there are some exceptions and specific situations where you might be able to deduct them.
General rule
Health insurance premiums paid for yourself, your spouse or common-law partner, and your eligible dependents are not considered eligible medical expenses for tax purposes. This means you cannot claim them as a deduction on your income tax and benefit return.
Exceptions
- Premiums paid for private health services plans (PHSPs) by your employer
These premiums are considered a taxable benefit to you. However, your employer can deduct them as an employment expense.
- Premiums paid for disability insurance
Premiums paid for disability insurance that provide income replacement benefits are considered eligible medical expenses and can be claimed as a deduction on your income tax and benefit return.
- Premiums paid for critical illness insurance:
Premiums paid for critical illness insurance that provide a lump-sum payment upon diagnosis of a covered illness are not considered eligible medical expenses and cannot be claimed as a deduction.
<strong>Health insurance premium deduction for self-employed </strong>
Self-employed individuals can deduct premiums paid for medical insurance as a business expense on their income tax and benefit return.
This applies to medical insurance that covers yourself, your spouse or common-law partner, and your eligible dependents.
Some specific situations:
- Premiums paid for health insurance as part of a separation agreement
If you are required to pay for health insurance for your ex-spouse or common-law partner as part of a separation agreement, you may be able to deduct these premiums as alimony.
- Premiums paid for health insurance for a child with a disability
If you have a child with a disability and you pay for health insurance that covers their specific needs, you may be able to claim the premiums as a medical expense.
<strong>How much of your health insurance premium is tax deductible? </strong>
As mentioned, the general rule in Canada is that health insurance premiums are not tax deductible. There are, however, some exceptions and specific situations we discussed, where you might be able to deduct a portion of them.
Do you need to pay more than monthly premiums?
The premium is just one component of your total healthcare costs. You may also need to pay other costs, such as:
- Deductible: The amount you must pay out of pocket before your insurance starts covering your medical expenses.
- Copayments: Fixed amounts you pay for specific services, like doctor visits or prescription drugs.
- Coinsurance: A percentage of the cost of covered medical services you pay after meeting your deductible.
Understanding what premium means in health insurance can help you make informed decisions about choosing a plan that fits your budget and healthcare needs. A good way to start is to get personalized quotes using our comparator.
